Obamacare primer: How is it really going to work?

In less than three months, people are going to be able to sign up for Obamacare coverage for the first time.

To hear the Obama administration tell it, it’ll be quick and painless. Fill out a short form, and new health insurance marketplaces will be instantly able to “ping” a massive data system that can check just about everything you say — keeping most people honest and cheats to a minimum.

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This week in Congress: House moves on individual mandate

To hear Republicans tell it, it’ll be rife with headaches and fraud. They’ve been up in arms over the surprise announcement that the law’s employer coverage requirement is being delayed. And they say the government will basically be throwing subsidy money at people without checking to make sure they deserve it.

It’s all another reminder of how many complicated pieces of Obamacare have to work together perfectly and how hard it will be for many Americans to trust that will happen. But with the Oct. 1 sign-up looming, here’s a guide to what people will really face:

Yes, there is an honor system — for some

One of the central questions in the sign-up is: Can I get a subsidy for my health insurance? The subsidies are designed to make sure that more people can get health care coverage by giving them taxpayer dollars to help pay for it.

But already, Republicans and conservatives are jumping out of their skin over a provision buried in a 600-page rule the Obama administration announced the day after July Fourth.

It said that, basically, some people will have to get subsidies because they say they should get them.

But who really gets to use the honor system? Not many people, administration officials and outside analysts say — because you’d have to jump through too many hoops to get to that point.

For one thing, you’d have to get your Obamacare coverage in one of the just 16 states (plus the District of Columbia) that will run their own health insurance exchanges — because they’re the only ones who are affected by the new rule.

When you apply for coverage, you’ll state that either your employer doesn’t offer health coverage at all or, if it does, you might be asked how much you pay for it — because if it’s not considered affordable, you might still qualify for Obamacare and get a subsidy. In Maryland, for example, there will be a drop-down menu on the website where you’d fill out how much you pay for health care for each pay period, according to Rebecca Pearce, the executive director of the Maryland health insurance exchange.

That’s where there won’t be an easy way to check to see if your employer actually does provide health coverage — for the first year, at least. When employers start reporting that information, those states will check random samples of applications to make sure people aren’t getting Obamacare coverage when they could have gotten it through the workplace.

But for the first year, the states that run their own exchanges won’t have to do those random checks, according to an administration official. So that’s where they’d have to accept what you say about your employer coverage. The federal exchange, however, will do those checks in the states it serves.

“The ‘delay’ of verification requirements does appear to make fraud significantly more likely” because it won’t be easy to check in those states whether they should have gotten Obamacare coverage at all, said Yuval Levin of the conservative Ethics and Public Policy Center.

Another administration official, however, said, “It was always going to be a little bit of an honor system” because officials never expected to have a complete database of employer coverage in the first year. The goal was always to have that up and running in 2015, which is when it would be needed to check people’s 2014 taxes anyway.

How they’ll check your income (or not)

The main criticism, however, is that people will be getting subsidies who don’t deserve them.

When you apply, you’ll estimate your income or wages, and the exchange will check that against the electronic sources it has — like your tax return for last year or current wage information that states usually track. In Maryland, for example, it would be the state’s quarterly wage system.

If you put down something suspicious — like a big drop in your income compared to last year, which could help you get a bigger subsidy — the exchange will ask you for more information. It will probably check your current wage information from the state, for example, and see if your income really did drop.

If that current wage information isn’t available, they’ll ask you for more documentation — if you’re in the random sample that states are supposed to check.

But if you’re not in that random sample, you reported a drop in income and the exchange can’t check it against anything more recent than last year’s tax return, that’s where they’d have to take your word for it.

So you could play that game — if you’re willing to take the risk that you’ll have to pay it all back when you’re caught and face the perjury charges you’ll be warned about on the application.

“It really is a narrow set of circumstances” where the exchanges might not be able to check people that closely, said Judy Solomon of the liberal Center on Budget and Policy Priorities, who wrote a blog post explaining the rule.

You’ll have to pay it back — but not all of it

The best safety net in the law, administration officials say, is that anyone who does get subsidies they didn’t deserve would just have to pay them back the next year when they file their taxes.

If your income is low enough, you’ll get premium tax credits to help pay for your coverage. But there’s a bit of guesswork involved — you have to figure out what your income is going to be next year. And under the Obamacare law, if your income turns out to be higher when you file your taxes, you’ll have to repay the feds.

That’s why some health care analysts say there’s no real incentive for the fraud that Republicans are warning about — because you’d get caught next year anyway.

“They’re barking up the wrong tree” by focusing on fraud, said health care consultant Robert Laszewski. “At best, it’s going to be a loan for 12 months.”

The real danger, Laszewski said, is that people who can’t guess their income right will have a nasty surprise when they get stuck with a big tax bill the next year.

The catch, though, is that the feds wouldn’t be able to get all of their money back — because there are limits on how much of the overpayments can be recovered.

Depending on how high people’s incomes are, the federal government could recover anywhere from $600 to $3,500 of any Obamacare tax credits that they shouldn’t have gotten. That’s likely to be “significantly lower than the amount of excess payments” in many cases, the Ethics and Public Policy Center’s Levin said.

And Rep. Michael Burgess (R-Texas) said he doesn’t have a lot of confidence that this self-correcting mechanism would work anyway because he says the Obama administration has already proven that when something gets too complicated with Obamacare, they’ll just drop it.

“They’ll just say, ‘Well, this is bad debt, it’s too complicated, we can’t collect it, so let’s just move on to next year and see if we can do better,’” Burgess said.

Other analysts, however, say people will still be deterred from gaming the system because they don’t want to be hit with a big tax bill. And they say the counselors — or “navigators” — who will help a lot of people sign up will warn people of the consequences, too.

“These helpers are really going to be on the lookout to make sure that people understand the repercussions of not getting it right,” said Tricia Brooks, a senior fellow at the Georgetown Center for Children and Families.